Despite the promulgation of the so-called Investment Law in Lao PDR, Lao expatriates remained unmoved by it.

Only a handful of Lao expatriates return home to "invest." Business transactions, beginning from application for license to the day-to-day operations of the enterprise, are governed more by the law of the jungle than the rule of law as we know it in civilized society.

Law on the promotion and management of foreign investment in the Lao People's Democratic Republic

Law No. 1 adopted by the National Assembly on 14 March 1994

Issued by Presidential Decree No. 23 of 21 April 1994 and

Coming into force on June 1994

Lao People's Democratic Republic

Peace independence democracy unity prosperity

National Assembly No. 01/94

Section One: General provisions

Article 1: The Government of the Lao people's Democratic Republic encourages foreign persons, either individuals or legal entities, to invest capital in the Lao People's Democratic Republic (hereinafter "the Lao PDR") on the basis of mutual benefit and observance of the laws and regulations of the Lao PDR. Such persons hereinafter shall be referred to as "foreign investors".

Article 2: Foreign investors may invest in and operate enterprises in all fields of lawful economic activity such as agriculture and forestry, manufacturing, energy, mineral extraction, handicrafts, communications and transport, construction, tourism, trade, services and others.

Foreign investors may not invest in or operate enterprises which are detrimental to national security, the natural environment, public health or the national culture, or which violate the laws and regulations of the Lao PDR.

Article 3: The property and investments in the Lao. PDR of Foreign investors shall be fully protected by the laws and regulations of the Lao PDR. Such property and investments may not be requisitioned, confiscated or nationalized except for a public purpose and upon payment of prompt, adequate and effective compensation.

Section Two: Forms of foreign investment

Article 4: Foreign investors may invest in the Lao PDR in either of two forms:

1.A Joint Venture with one or more domestic Lao investors or (2) A Wholly Foreign-Owned Enterprise. 2.A Wholly Foreign-Owned Enterprise.

Article 5: A Joint Venture is a foreign investment established and registered under the laws and regulations of the Lao PDR which is jointly owned and operated by one or more foreign investors and by one or more domestic Lao investors.

The organization management and activities of the Joint Venture and the relationship between its parties shall be governed by the contract between its parties and the Joint Venture's Articles of Association, in accordance with the laws and regulations of the Lao PDR.

Article 6: Foreign investors who invest in a Joint Venture must contribute a minimum portion of thirty percent (30%) of the tota1 equity investment in that Venture. The contribution of the Venture's foreign party or parties shall be converted in accordance with the laws and regulation of the Lao PDR into Lao currency at the exchange rate then prevailing on the date of the equity payment(s), as quoted by the Bank of the Lao PDR

Article 7: A wholly Foreign-Owned Enterprise is a foreign investment registered under the laws and regulations of the Lao PDR by one or more foreign investors without the participation of domestic Lao investors. The Enterprise established in the Lao PDR may be either a new company or a branch or representative of5ce of a foreign company.

Article 8: A foreign investment which is a Lao branch or representative office of a foreign company sha11 have Articles of Association which shall be consistent with the laws and regulations of the Lao PDR and subject to the approval of the Foreign investment Management Committee of the Lao PDR.

Article 9: The incorporation and registration of a foreign investment sha11 be in conformity with the Enterprise Decree of the Lao PDR.

Section Three: Benefits, rights and obligations of foreign investors

Article 10: The Government of the Lao PDR shall protect foreign investments and the property of foreign investors in accordance with the laws and regulations of the Lao PDR. Foreign investors may lease land within the Lao PDR and transfer their leasehold interests; and they may own improvements on land and other moveable property and transfer those ownership interests.

Foreign investors shall be free to operate their enterprises within the limits of the laws and regulations of the Lao PDR. The Government shall not interfere in the business management of those enterprises.

Article 11: Foreign investors sha11 give priority to Lao citizens in recruiting and hiring their employees. However, such enterprises have the right to employ skilled and expert foreign personnel when necessary and with the approval of the competent authority of the Government of the Lao PDR.

Foreign investors have an obligation to upgrade the skills of their Lao employees, through such techniques as training within the Lao PDR or abroad.

Article 12: The Government of the Lao PDR shall facilitate the entry into, travel within, stay within, and exit from Lao territory of foreign investors, their foreign personnel, and the immediate family members of those investors an those personnel. All such persons are subject to and must obey the laws and regulations of the Lao PDR while they are on Lao territory.

Foreign investors and their foreign personnel working within the Lao PDR shall pay to the Lao government personal income tax at a flat rate of ten percent (10%) of their income earned in the Lao PDR.

Article 13: Foreign investors shall open accounts both in Lao currency and in foreign convertible currency with a Lao bank or foreign bank established in the Lao PDR.

Article 14: In the management of their enterprises, foreign investors shall utilize the nationa1 system of financia1 accounting of the Lao PDR. Their accounts shall be subject to periodic audit by the Government's financial authorities in conformity with the applicable Lao accounting regulations.

Article 15: In conformity with the law and regulations governing the management of foreign exchange and precious metals, foreign investors may repatriate earnings and capital from their foreign investments to their own home countries or to third countries through a Lao bank or foreign bank established in the Lao PDR at the exchange rate prevailing on the date of repatriation, as quoted by the Bank of the Lao PDR.

Foreign personnel of foreign investments may also repatriate their earnings, after payment of Lao personal income taxes and all other taxes due.

Article 16: Foreign investments subject to this law shall pay a Lao PDR annual profit tax at e uniform flat rate of twenty percent (20%), calculated in accordance with the provisions of the applicable laws and regulations of the Lao PDR.

Other Lao taxes, duties and fees shall be payable in accordance with the applicable laws and regulations of the Lao PDR.

For foreign investments involving natural resources exploitation and energy generation, sector-specific taxes and royalties shall be prescribed in project agreements entered into between the investors and Lao Government.

Article 17: Foreign investments shall pay a Lao PDR import duty on equipment, means of production, spare parts and other materials used in the operation of their investment projects or in their productive enterprises as a uniform flat rate of one percent (1%) of their imported value. Raw materials and intermediate components imported for the purpose of processing and then re-exported shall be exempt from such import duties. All exported finished products shall also be exempted from export duties.

Raw materials and intermediate components imported for the purpose of achieving import substitution shall be eligible for special duty reductions in accordance with the Government's incentive policies.

Article 18: In highly exceptional cases and by specific decision of the Government of the Lao PDR, foreign investors may be granted special privileges and benefits which may possibly include a reduction in or exemption from the profit-tax rate prescribed by Article 16 and/or a reduction in or exemption from the import-duty rate prescribed by Article 17, because of the large size of their investments and the significant positive impact which those investments are expected to have upon the socio-economic development of the Lao PDR.

In the event of the establishment of one or more Free Zones or Investment Promotion Zones, the Government shall issue area-specific or general regulations or resolutions.

Article 19: After payment of its annual profit tax, a foreign investor shall devote a portion of its profit each year to various reserve funds necessary for the operation and development of the enterprise in order to continuously improve the enterprise's efficiency, in accordance with the policy and the Articles of Association of the enterprise.

Article 20: Foreign investments approved under this law sha11 at all times be operated in accordance with the laws and regulations of the Lao PDR. In particular, foreign investors sha11 take al1 measures necessary and appropriate to ensure that their investments facilities, factories and activities protect the natura1 environment and the health and safety of the workers and the public at large, and that their investments contribute to the socia1 insurance and welfare programs for their workers in conformity with the policy and the laws and regulations of the Lao PDR.

Article 21: In the event of disputes between foreign parties within a foreign investment, or between foreign investors and Lao parties, the disputants should first seek to settle their differences through consultation or mediation.

In the event that they fail to resolve the matter, they shall then submit their dispute to the economic arbitration authority of the Lao PDR or to any other mechanism for dispute resolution of the Lao PDR, a foreign country or an appropriate international organization which the disputants can agree upon.

Section Four: The organization of foreign investment management

Article 22: The Government of the Lao PDR has established a State organization to promote and to manage foreign investment within the Lao PDR titled the Foreign Investment Management Committee (hereinafter called "the FIMC").

The FIMC is responsible for administration of this law and for the protection and promotion of foreign investment within the Lao PDR.

Article 23: All foreign investments established within the Lao PDR shall be assisted, licensed and monitored through the "1-stop-service" of the FIMC, acting as the central focal point for all Government interactions with the investors, with the collaboration of the concerned ministries and the relevant provincial authorities.

Article 24: A foreign investment shall be considered to be legally established within the Lao PDR only upon the investment's receipt of a written foreign investment license granted by the FMC.

Article 25: A foreign investor which seeks a license for a foreign investment shall submit to the FMC an application and such supporting documentation as the FMC may prescribe by regulation.

The FMC may grant preliminary approval-in- principle for investment projects being specially promoted by the Government.

Article 26: Upon receipt of a completed application and supporting documentation, the FIMC shall screen them, take a foreign-investment licensing decision and notify the applicant of the decision within 60 days of the application's submission date.

Within the same overall 60-day period, concerned ministries and provincial authorities consulted by the FIMC for their views shall have a maximum of 20 days in which to reply.

Article 27: Within 90 days of receiving its foreign investment license from the FIMC, a foreign investors shall register that license and commence operation of its investment in conformity with the implementation schedule contained in the investment's feasibility study and with the terms and conditions of the license granted by the FIMC, and in accordance with the laws and regulations of the Lao PDR.

Article 28: The FIMC has responsibility to coordinate with other concerned ministries and provincial authorities in monitoring and enforcing the implementation of a foreign investment in conformity with the investment's feasibility study and with the terms and conditions of the investment license, and in accordance with the laws and regulations of the Lao PDR.

The concerned ministries and provincial authorities have the responsibility to perform their respective monitoring and enforcement obligations.

Article 29: If a foreign investor violates the agreement and the terms and conditions of its foreign investment license or the laws and regulations of the Lao PDR, the investor shall be notified of the detected violation and shall be instructed to promptly desist. In the event the investor fails to desist or in case of a serious violation, the investor's foreign investment license may be suspended or revoked and the investor may additionally be subject to other sanctions under the applicable laws and regulations of the Lao PDR.

Section Five: Final provisions

Article 30: This law shall come into force 60 days after its ratification.

Upon the entry into force of the present law, the foreign investment law of the Lao People's Democratic Republic No. 07/PSA dated 19 April 1988 shall cease to have effect, without prejudice to the rights and privileges granted to, and the obligations imposed upon, foreign investments under the law No. 07/PSA

Notwithstanding this provision, a foreign investor which received its license under the prior law may elect to petition the FIMC in writing, within 120 days of the coming into force of this law, to become subject to the terms of this law. The FIMC may grant such petitions at its discretion. For a foreign investor whose petition is granted, the right and benefits previously granted, and the obligations previously imposed under the law No. 07/PSA shall thereafter prospectively cease to have effect.

Article 31: The Government of the Lao PDR shall, by decree, issue detailed regulations for the implementation of this law.